T1135 Penalties

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waynebaxter
Posts: 1
Joined: Tue Jan 25, 2022 2:21 am

T1135 Penalties

Post by waynebaxter »

Does anyone know how T1135 penalties are assessed?

I realized that I did not file a T1135 for the 2017 tax year and my foreign assets ($120K CAD worth of USD cash in savings accounts) were above $100K CAD threshold for about three months in that year. I submitted that return in early 2018 and I've paid taxes on all the interest I earned from that cash. However, I made a mistake and did not file the T1135 form. 2017 was the first year I had foreign assets, and I have filled the T1135 ever since.

I'm planning on filing the 2017 T1135 soon to correct my mistake but wanted to understand how much of a penalty I might actually owe. The table of penalties on CRA's website (included below) is scaring me and I'm not sure if I am misunderstanding/miscalculating something. Would appreciate a second opinion, so I can start budgeting for the penalty.


Questions:
1. Are these penalties cumulative?
2. If it is cash, what is considered the cost of the foreign property?
3. Am I estimating my payable penalty correctly? Calculated it as $44,500 with the following penalties:
= Penalty 1: 162(7) Failure to comply - $2,500
+ Penalty 2: 162(10)(a) Failure to furnish foreign-based information - $12,000 (Max because it is more than 24 months)
+ Penalty 3: 162(10.1) Additional penalty – After 24 months - $6,000 (5% of property value @$120K CAD)
+ Penalty 4: 163(2.4) False statements and omissions - $24,000
Note: Assuming penalty 162(10)(b) is not applicable because a demand to file a return under subsection 233(1) was not issued to me.


CRA Table of Penalties for T1135
Copied from: https://www.canada.ca/en/revenue-agency ... lties.html

Failure to File
1. 162(7) – Failure to comply – The penalty for failing to file a return is $25 per day for up to 100 days (minimum $100 and maximum $2,500).

2. 162(10)(a) – Failure to furnish foreign-based information – Where the failure to file is done knowingly or under circumstances amounting to gross negligence, the penalty is $500 per month for up to 24 months (maximum $12,000), less any penalties already levied.

3. 162(10)(b) – Failure to furnish foreign-based information – Where a demand to file a return is issued under subsection 233(1) and the person or partnership knowingly or under circumstances amounting to gross negligence fails to comply with the demand, the penalty is $1,000 per month for up to 24 months (maximum $24,000), less any penalties already levied.

4. 162(10.1) – Additional penalty – After 24 months, the penalty becomes 5% of whichever of the following resulted in the requirement to file the information return, less any penalties already levied: the cost of the foreign property; the fair market value of the property transferred or loaned to the trust; or the cost of the shares and indebtedness of the foreign affiliate.

False statements and omissions
5. 163(2.4) – This penalty applies to people who, knowingly or under circumstances amounting to gross negligence, make false statements or omissions in an information return.

In the case of Form T1142, the penalty is the greater of either $2,500 or 5% of whichever of the following the false statement or omission was made about: the fair market value; distributed property; or unpaid indebtedness.

In the case of the other information returns, the penalty is the greater of either $24,000 or 5% of whichever of the following the false statement or omission was made about: the cost of the foreign property; the fair market value of the property transferred or loaned to the trust; or the cost of the shares and indebtedness of the foreign affiliate.
ND
Posts: 291
Joined: Thu Feb 21, 2013 5:28 pm

Re: T1135 Penalties

Post by ND »

I've heard of firms preparing voluntary T1135 filings with amnesty, perhaps look into that.
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